EU supervisor should focus on big banks:Germany

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EU supervisor should focus on big banks:Germany

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Germany's finance minister wants new European banking supervisor to limit its focus on major banks.

31 August,2012 08:22 pm

Their stability is vital to Europes financial security rather than spreading itself too thinly and monitoring all of the regions 6,000 lenders.Wolfgang Schaeubles comments in an article for the Financial Times Friday could lead to a conflict between Berlin and the European Unions executive Commission, which is to present proposals Sept. 12 on how to put a Europe-wide supervisory system in place.Plans for the new banking body are being drawn up after European leaders in June called for a new system as part of efforts to tackle the debt crisis in the 17 countries that use the euro.The EUs internal market commissioner, Michel Barnier, was quoted as telling German daily Sueddeutsche Zeitungs Friday edition that the plan is for more than 6,000 banks in eurozone countries to be supervised by the European Central Bank in close cooperation with national supervisors.Schaeuble, however, wrote that it is crucial that the new system be truly effective.We must eschew yesterdays light-touch approach for good and endow this supervisor with real and clearly defined responsibilities, coercive powers and adequate resources, he said.This also means that it should focus its direct oversight on those banks that can pose a systemic risk at a European level, Schaeuble added. He said that was common sense; we cannot expect a European watchdog to supervise directly all of the regions lenders 6,000 in the eurozone alone effectively.Lawmakers in the conservative party of Schaeuble and Chancellor Angela Merkel argue that theres no reason why smaller local savings banks, for example, need ECB oversight.Barnier, however, was quoted as saying: We are convinced that all banks must be centrally supervised. Otherwise, serious problems can arise.The commissioner added that the plans also call for all banks being helped by the eurozones permanent rescue fund to be centrally supervised starting next January. Big banks would be subject to central oversight from July 2013 and the system could be extended to all banks in January 2014.In his article, Schaeuble didnt specify when central banking oversight might be introduced. But he said that setting up such a system will be no simple undertaking and doing so within a reasonable timeframe will require not just hard work but also courage, for it implies a big step toward more European integration.He said that, if the supervisory job is handed to the ECB, decision-making on banking supervision and monetary policy should be strictly separated so as to pre-empt conflicts of interests.That, he added, also would make it easier for EU countries that dont use the euro to take part in the supervisory system.